Investment in Brazil's Middle Classes

After eight years under Lula, Brazil now has a new president. Like her predecessor, newly-elected President Dilma has pledged to continue investment in Brazil’s new middle classes.
Under this investment, Brazil has experienced spectacular economic and social growth. A glance at statistics in key areas since 2002 shows impressive increases in both Brazilian wealth and social status. Although there is still plenty to do to fulfil Dilma’s pledge to end poverty in Brazil, the investment has paid off hugely. And thanks to the new-found wealth and spending power, Brazil looks well set to become one of the world’s top five economic powers.

Since 2002 when Lula came to power, Brazil has seen steady economic growth. The increase in income – the minimum wage in Brazil has grown over 60% since 2002 – and decrease in unemployment (currently 5.7%, the lowest for 15 years) has led to a legion of new spenders. Brazil now has 40 million new consumers whose big spending is, in turn, driving the economy forward.
The recent Christmas shopping period was reportedly the best ever throughout Brazil and consumer spending is expected to continue to rise over the next few years with an increase of 4% forecast for this year. Domestic appliances and telecommunications are experiencing huge increases in sales – mobile telephone ownership has gone up by nearly 500% since 2002 and internet connections by over 340%.
But the new consumers also aspire to bigger purchases. Top of the new middle class wish list is a home. Property investment in Brazil has increased dramatically over the last few years and is set to do even further this year as more and more Brazilian families get a foot on the property ladder.
Next on the wish list are cars with 45% of the new middle class keen to buy a vehicle. Car manufacturing has grown by 88% since 2002, but there is still plenty of room for growth in this key sector, a favourite for investment in Brazil. This year, several large car manufacturers such as Fiat, Ford and Volkswagen have earmarked large investment sums for their factories at locations throughout Brazil.
Driving Brazilian investment in property and cars is the availability of credit. Since Lula was first elected president in 2002, credit has grown by 180%. This translates into a rise from R$600 billion in loans in 2002 to a massive R$1.68 trillion in 2010. And credit looks set to grow even further this year on the back of record numbers of mortgages.
Government investment in Brazil’s middle class has more than paid off in terms of economic growth and potential. There is still a lot to do – 5% of Brazilians live below the poverty line, but further investment in property through the social housing programme, Minha Casa Minha Vida, and in education should ensure this figure continues to fall. It has already dropped significantly since 2002 when it was 9%.
For Obelisk International, the transformation of Brazil over the last few years has been more than impressive. However, we believe this is just the beginning. As more and more Brazilian move up the middle classes, consumer spending will continue to grow driving the economy even further. This together with the planned investment by the government should ensure that Brazil continues to provide spectacular statistics.

About Obelisk International: Obelisk International offers select investment opportunities in Brazil and gives investors security, profitability and diversity thanks to a combination of close attention to our clients' investment requirements and high quality in-house research and analysis.